Report: High school dropouts cost economy billions

High school dropouts are costing some $1.8 billion in lost tax revenue every year, education advocates said in a report released Monday.

If states were to increase their graduation rates, state and federal lawmakers could be plugging their budgets with workers' taxes instead of furloughing teachers, closing drivers-license offices and cutting unemployment benefits. While advocates tend to focus on the moral argument that all children deserve a quality education, they could just as easily look at budgets' bottom lines.

"This has huge economic implications," said John Bridgeland, president and CEO of Civic Enterprises, a public policy group that helped write the report.

That's part of the reason Education Secretary Arne Duncan on Monday introduced a three-year, $15 million effort to put AmeriCorps members in 60 of the nation's worst schools. About 650 AmeriCorps members are going to try to raise graduation rates, increase math and reading skills and prepare more students for college.

"Turning around our nation's lowest-performing schools is challenging work that requires everyone to play a part - from teachers, administrators and counselors to business leaders, the philanthropic sector and community members," Duncan said.

Increased graduation rates might be the most lasting way to turn around struggling budgets.

Some 24 state budgets are smaller than they were in 2008 and states are still clawing their way back to pre-recession levels, according to the National Association of State Budget Officers.

Lawmakers in state capitols are making tough choices about whether to raise taxes to keep classroom lights on or to sell off state agencies to provide health care to seniors. Federal officials, meanwhile, are looking at some $85 billion in automatic spending cuts that are set to take hold at the end of the week.

Take Colorado, where the state cut $4.7 million from its higher education budgets between fiscal years 2012 and 2013, according to the budget officers' annual report.

If 90 percent of students finished high school, state and local governments would have $4.1 million extra, the education advocates said. The state graduated 74 percent of its students in 2011.

Or New Jersey, where the state cut $19.2 million from its public assistance budget that includes disaster relief and mental health services, the budget officers' said in their annual report.

Had the state graduation rate been 90 percent, the cuts could have been dodged through $19 million in added tax revenue these high school dropouts would pay in state and local taxes, according to the education advocates' report. Some 83 percent of New Jersey students graduated on time in 2011.

Or Washington, where the state cut $17 million from its primary and secondary education budget, according to the budget officers.

Had 90 percent of its students finished high school instead of 76 percent in 2011, state and local governments could be collecting $14 million more in taxes, the education advocates said.

Nationally, a 90 percent graduation rate would yield $1.8 billion in local, state and federal taxes based on $5.3 billion in higher wages, according to the Alliance for Excellent Education.

All told, the group sees a graduation rate at that level producing an additional $6.6 billion in economic growth.

The group reached those tallies by comparing the annual average earnings of a high school dropout against those of a high school graduate in each state and projecting over time. The calculations took into account the share of students who go on to college and projected workers' tax rates based on training.

None of their projections took into account government costs for those who don't finish high school, such as law enforcement, unemployment aid or job training.

Other groups that helped craft parts of the report included Civic Enterprises, America's Promise Alliance and Johns Hopkins University's School of Education.

While there's no doubt students who attain higher education earn more and likely pay higher taxes, the groups' methods for calculating deserves some scrutiny.

"They tend to take the numbers that they find and then extrapolate them. It's a very simple way of doing things," said Henry Levin, the co-director of the Center for Benefit-Cost Studies in Education at Teacher's College Columbia University.

"You have to be very careful with these," said Levin, who studies the economics of education. "It's like saying, if my 3-foot-tall child were 6 feet tall, my child would be able to do all sorts of things. But it doesn't make any sense to talk that way because it's not going to happen right now."

The same can be said for suddenly increasingly the graduation rate to 90 percent, he said.

Yet that goal is hardly new; it was first outlined in 1990 by then-President George H.W. Bush.

Since then, three other U.S. presidents have called for that rate. Each, however, pushed back the year the nation should reach that goal.

The latest, President Barack Obama, wants to reach that high school graduation rate by 2020.

"For the first time, the nation is on pace to reach the high school graduation rate by 2020," said Bridgeland, who was President George W. Bush's domestic policy adviser. "Over the last decade, the country was inching up from 2001 to 2006, then rocketed forward from 2006 to 2010, creating the pace of progress."

But it's not certain.

Students with limited English fluency and those with learning disabilities still face challenges to finishing high school; only a quarter of those groups finish high school in some states. Also, about a third of black students and 29 percent of Hispanics leave high school without earning a diploma, according to the report.

"It's within the realm of possibility, which is a real accomplishment," said Robert Balfanz, who studies dropouts at Johns Hopkins University and is co-director of the school's Everyone Graduates Center.